SCOTMID has reported a 92 per cent drop in profits for the first half of the year as consumer spending continues to fall.

First half pre-tax profit was s0.6 million compared to s8.4 million for 2010, though the bulk of last years gains came from the sale of an Edinburgh supermarket.

The convenience store operator said operating profits dropped 38 per cent to s2.6 million compared to s4.2 million a year ago and warned of "years" of stifled consumer spending to come.

Co-operative group, which operates 260 Scotmid and Semichem outlets, said turnover rose by s32 million to s219 million in the first half, largely from the Botterills Convenience stores acquired last year.

Scotmid is one of the largest employers in Scotland with more than 4,000 workers across retail stores, a funeral business and property division.

Chief executive, John Brodie, said the economy is now "in a different place from a year ago", and expects Scottish consumer spending will fall further.

He said: "Our expectations are we will have at least a few difficult years ahead and there is no sign of any improvement in the short term.

"We expect at least another two years of very difficult trading conditions.

"Our expectation for the second half of this year is it will be as challenging as the first half, though traditionally we make more of our profits in the second half."

However the company said it remains in a strong financial position with assets of more than s100 million.

And Brodie said he is not ruling out making further acquisitions going forward.

"We are still very much focused on our long term aims, though we are not ignoring the short term challenges," he said.

"Our priority this year was the integration of Botterills but we have not lost our ambition to grow and we already have plans in place for a small number of new stores for next year."